NuWave electronics currently produces digital watches. However, they are considering expanding into one of two other product markets: $($i$)$ smart watches or $($ii$)$ digital music players. They have completed some preliminary market tests to confirm that a market exists for both products. If the smart watches are successfully developed, the company projects revenues of $$600,000$ over the next five years. If the digital music players are successfully developed, the company projects revenues of $$500,000$ over the next five years.

Since both products are very different from NuWave$$s current products, the company may not be able to successfully complete the product development process. There is a $75\%$ chance that the development of the smart watch will be successful. The company estimates that product development cost for the smart watch will be $$200,000.$ However, the digital music players will only cost $$20,000$ of research and development $($R&D$)$ investments. There is a $20\%$ chance that the development of the digital music player will be successful. For both new products, if the NPD process is not successful, then NuWave will realize $$0$ in revenues.

If the product development of either of these products is successful, then NuWave will discontinue sales of the digital watches. If they the development of either new products is a failure, they will discontinue that product and continue to produce digital watches at current output levels, which is predicted to yield $$225,000$ in annual profits for the next five years. In this case, development cost will have to deducted from the profits generated by the production of digital watches.

Prompt:

$-$ Complete the following decision table for Optimistic, Pessimistic and Expected Value Criterion $($Note: Round all numberd to thousands without decimal places and without $ sign$).$

$-$ Once you complete the table enter the appropriate decision alternative number in the space provided for each criterion $($Note: Do not type any characters other than one of the three decision alternative numbers!$)$:

Enter: $1$ for Digital Watches

Enter: $2$ for Smart Watches, or

Enter: $3$ for Digital Player

Alternatives States of Nature $($Profits in thousands $$\text{'}$s$)$ Optimistic Pessimistic Expected Value

Development Success Development Failure

$(1)$ Continue Making Digital Watches

$225,000$

$(2)$ Make Smart Watch

$200,000$

$(3)$ Make Digital Player

$-$ Using Optimistic Criterion Only, NuWave should chose

decision alternative

$-$ Using Pessimistic Criterion Only, NuWave should chose

decision alternative

$-$ Using Expected Value Criterion Only, NuWave should chose

decision alternative